October 07, 2009

Reasonableness Of Fees And Costs: Recent Decision Is A Landmine For Review Of Mathematical Basis of Fees and For Obtaining Reversal Of Fee Award

Sixth District’s 71-Page Decision Explores a Plethora of Issues.

We hardly know where to begin on the next one, a scholarly 71-page slip opinion from the Sixth District in Gorman v. Tassajara Development Corp., Case No. H031196 (6th Dist. Oct. 6, 2009) (certified for publication). However, we will give the highlights, because it does show how our California Courts of Appeal do more than eyeball things—they seriously try to make sure that a trial court decision makes sense under penalty of reversing and remanding as was the case here.

Briefly put, residential owners finally agreed to a settlement in a construction defect suit by which they reserved rights to seek fees and costs against settling former general contractor. (Maybe you see a Trope issue here—husband owner is the CEO, CFO, president, and secretary of the law firm primarily representing husband and wife owners of the residential property at issue.) All we can say is that a mess ensued. Owners requested fees of $1,350,538.83 (half of which were billed by husband owner/attorney personally) and costs in excess of $ 266,561.96, after discounting for blatant mathematical errors. After heavily contested fees/costs battles, the trial court—in a 27-word order—awarded owners $416,581.37 in fees and costs of $142,432.46. Not a bad day in the office, but owners appealed claiming they were entitled to more.

They won, in a very thorough 3-0 opinion authored by Presiding Justice Rushing.

Here are the nuggets from the reversal in this case:

Although there is some fodder for reconsideration of the general rule, the appellate panel did follow the view that no statement of decision is required on a fees motion, although it did not have to decide the precise issue because no timely statement of decision was made;

Routine costs are statutory, but the trial court does have discretion to award costs reasonably necessary to the overall litigation of the case;

“Tort of another” fees do not apply to a joint tortfeasor situation;

Stearman investigative costs are likely recoverable as costs if the parties agree to it;

Trope was properly applied to substantially reduce costs because owner was still the client even though he billed as the CEO, CFO, and president of the professional law corporation representing himself as a plaintiff (and his wife, too);

The attorney fee award had to be reversed where the end result did not make sense—the trial court made a dollar and cent award that the appellate court could not square with any mathematical reduction (hence, the award was arbitrary “after much [appellate] puzzlement and frustration”).

BLOG OBSERVATION—You have to read this in entirety to appreciate it. It covers a lot of issues, which we have summarized. However, Gorman does show that appellate courts will indeed reverse where they cannot make “heads or tails” of calculations—as this appellate panel did after a very careful review.

BLOG FAVORITE QUOTE FROM OPINION—“As will appear, one theme in this case is that attorneys are not mathematicians.” (Slip Opn., p. 2, fn. 1.) [O.K., time to give a personal glimpse into things in the past—co-contributor Mike did a trial in Monterey County Superior Court before then sitting Judge Wunderlich (who later became an appellate judge, and a good one at that). Judge Wunderlich found for Mike in the case, but observed that his math needed some work. There you go—point made!]